Current Account Dynamics and Monetary Policy

Prepared for the NBER conference on "International Dimensions of Monetary Policy" in Girona (Spain), June 2007. The authors are grateful to Paolo Pesenti, Gianluca Benigno and Luca Dedola for their discussions and to participants at several conferences for helpful comments. Gertler thanks the NSF and the Guggenheim Foundation for financial support. The views expressed in this paper are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York, the Federal Reserve System, the Sveriges Riksbank, or the National Bureau of Economic Research.